PE at center of mixed resin pricing picture for June

North American prices for polyethylene resin led a chaotic market in June.

A number of PE buyers in the region saw prices fall an average of 3 cents in June. Although the number of buyers seeing the drop was not as high as anticipated by market watchers, buyers who did not see the drop in June are expected to see it by the end of July.

The Plastics News weekly resin pricing chart showed the drop on July 1.

A variety of forces are causing this market confusion. Ample supplies of PE are available as a result of recent shale-fueled expansions, but PE makers have kept markets relatively snug by exporting as much new material as they can.

At the same time, U.S. tariffs are preventing lower-priced material from reaching North American buyers, giving domestic producers more leverage. Domestic demand, however, has not been overly strong in the first half of the year, putting some bargaining power back into the hands of buyers.

The 3-cent PE price drop — whether seen in June or July — leaves domestic prices flat on a net basis through the first seven months of 2019. Prices had been flat in May after seeing a 3-cent hike in April. Several buyers told Plastics News at the time that they felt the April increase was not warranted by supply/demand factors.

The wave of new U.S. PE capacity is expected to peak this year, with ExxonMobil Chemical, LyondellBasell Industries, Formosa Plastics Corp. USA and Sasol all adding capacity on the U.S. Gulf Coast. Shell Chemical is also expected to open a major new PE unit near Pittsburgh around 2021.

The pricing picture for other commodity resins was mixed in a hectic June. Regional polypropylene prices fell 4 cents for the month, with PET bottle resin prices down 2 cents. Prices for solid polystyrene were flat, while PVC prices made a surprising upward move.

The 4-cent PP drop effectively erased a 4-cent increase from May. The June decrease followed a similar pricing trend for polymer-grade propylene feedstock. Regional PP prices had been flat in April after five straight monthly declines lowered prices by a total of 24.5 cents.

In 2020, North American PP supplies will be impacted by the addition of almost 1 billion pounds of capacity by Braskem in LaPorte, Texas, and 550 million pounds of capacity by Formosa Plastics Corp. USA in Point Comfort, Texas.

The 2-cent PET drop in June surprised some market watchers, since it took place at a time when demand for bottled water and carbonated soft drinks — two major PET end markets — remains high. PET prices had taken surprising price drops of 3 cents in May and 1 cent in April as well. Regional PET prices now are down a net of 4 cents per pound since Jan. 1.

North American PET remains oversupplied, sources said, even as demand from the beverage market has picked up with North America moving into warmer summer months. Operating rates for paraxylene and MEG feedstocks remain low, sources said, making it difficult for producers to increase prices.

Regional prices for solid polystyrene resin were flat for the second straight month in June, even as prices for benzene feedstock in the regions increased slightly. PS prices had jumped 4 cents in April when benzene prices surged by a larger amount.

Sources said that North American PS sales in the first half of 2019 were up roughly 1 percent, with gains in consumer products and electrical/electronic offset by sizable losses in construction.

The only surprise June price increase came from the PVC market, where prices ticked up an average of 2 cents per pound. This move surprised some market watchers, since construction activity, which drives demand for the resin, has not been overly strong so far in 2019.

Through May, U.S. housing starts were down more than 3 percent vs. the same period in 2018, according to the U.S. Census Bureau. The June PVC increase essentially makes up for a 2-cent decline seen by the market in April. Regional prices had been flat in May.

"The export market is strong worldwide and the domestic market is fairly strong," one market watcher told Plastics News. "PVC inventory was pulled down [in June] and there's a snugness in the market; even though ethylene is down, the supply and demand curve is driving the price up."

Plastics News also recently reported price changes for some North American engineering resins. Oversupply and decreased demand have led to lower prices for several materials since April 1.

North American prices for nylon 6 are down an average of 8 cents per pound in that time frame, with polycarbonate prices down 5 cents and ABS prices down 7 cents.

Market watchers said abundant supplies should keep prices for those materials flat to slightly down for the remainder of the year, even if demand is steady.

In feedstocks used to make commodity plastics, West Texas Intermediate crude oil prices began June near $53.50 per barrel but had jumped to $59 by the end of the month, for an increase of just over 9 percent. Regional prices for natural gas declined from $2.40 per million British thermal units (Btus) to $2.25 in the same comparison, for a drop of more than 6 percent.